The fall of King Kenny: GVC loses its leading light

20 July 2020

From AIM minnow to FTSE 100 constituent, the story of Kenny Alexander’s 13 years at GVC is an extraordinary tale but the derailment of its retail strategy by the pandemic leaves a lot riding on the US for his highly rated successor, writes Scott Longley

Note: The news this morning that HMRC is "widening the scope of its investigation" into GVC's previous involvement with its Turkish business casts a dramatic new light on the departure of CEO Kenny Alexander. As Scott Longley said in the following article published yesterday, any departure of a chief executive is nuanced and the allegations in the newspapers over Turkey would have played a part in the timing of his resignation.

For GVC, as is set out below, his legacy remains an extraordinary tale of taking a company from Aim-listed minnow to FTSE 100 status and one where the new CEO faces the challenge of making a go of the US. But to say the least, that legacy is now in danger of being tarnished as is exemplified by the 8% fall in the GVC share price in the wake of the news.

And just like that, he was gone. “We’ve got great people, great technology, great brands, a great culture, and it’s a great story, but I had to end sometime,” said Kenny Alexander, now the former chief executive at GVC, in his valedictory remarks to analysts when his resignation was announced last Thursday.

Just a week before, Alexander had been suggesting that GVC would be throwing “whatever it takes” to ensure that the ROAR Digital joint venture with MGM Resorts International wins big in the US market.

The line was echoed by new boss Shay Segev, hired by Alexander in 2018 and now handed the task of propelling the company forward.

That this whatever-it-takes effort will not now be helmed by Alexander adds extra uncertainty to the abruptness of his departure. Indeed, given the way that Alexander has consistently surprised and wrong-footed both observers and rivals in M&A battles, he might well be taking some pleasure in providing one last coup de grace.

As Gavin Kelleher, analyst at Goodbody in Dublin, said Alexander was “instrumental to GVC’s development”. That development has been nothing less than stunning. From AIM minnow to FTSE 100 constituent, the story of Alexander’s 13 years at GVC is indeed an extraordinary tale.

At the same time as GVC transformed itself, so the gambling sector itself metamorphosed and it would be impossible to overstate Alexander’s role in that change.

But it is also a contribution that would have been hard to predict. It is no unkindness to say that Alexander never truly fitted the role of a FTSE 100 chief executive. “Kenny is a betting man at heart,” says Richard Cooper, the ex-CFO under Alexander at GVC who left in 2017. “He comes to work with the Racing Post under his arm.”

“He leaves behind an amazing team there,” adds Cooper. “Kenny’s tremendous strength was to go from a micro-manager to a macro-manager. I don’t know how he did it, but he got the right people around him – some really great people – who supported him.”

That team remains in place, and specifically in Segev, GVC has the ready-made successor who Alexander himself pinpointed as such in an interview with the Times last year when he said he would remain in place for at least three more years.

So what changed? In part it flows back to the ill-considered share sale back in March 2019 when he cashed in £13.7m of GCV stock while then chairman Lee Feldman also offloaded £6m of shares, the combined move causing a 14% drop in the share price. Alexander later apologised for the move although it was Feldman who ultimately paid the price for the subsequent share price fall as he departed the company soon after.

Throw in some consternation regarding newspaper allegations over the Turkish disposal, though, and according to sources the concerns of the institutional shareholders began to mount.

Retail albatross
Starkly, the difference between then and now are the prospects for retail betting. One hard-to-overlook aspect of the final transformation of GVC is that the merger with Ladbrokes Coral bucked the trend by being an online business that moved into land-based retail.

Coming at the same time as the debate over the £2 maximum FOBT stake was coming to a head, the structure of the transaction was – to coin a hackneyed phrase about Alexander’s native Scotland – canny. The government’s decision meant the final transaction price came in at the low end of initial acquisition offer.

The eventual price of £4bn was viewed as a steal and highlighted once again that what made GVC stand apart from its peers in the gambling space was not only the aggressiveness in the way it pursued its targets but also the flexibility and creativity it employed in its M&A strategy.

Come the pandemic, however, and that retail estate looks like less of a bargain. Unfairly, of course, (because who would have predicted the events of the last four months) the crisis means that Plan A for GVC’s future is now, as one veteran executive of the gaming space says, “long, long forgotten.”

“As the architect of the plan, you are ultimately the one who takes the fall for any failing,” the source adds. “The way investors think – especially institutional investors – is that if they can’t blame the chief executive for failure, then who can they blame? Certainly not themselves.”

As one other long-standing online gaming executive suggested, when looking at the share price for GVC, this is some kind of failure. As of last Friday, the shares stood at 880p, not so far off pre-Covid highs in the 910/920p region and an appreciable bounce-back from the low in March of 292p.

Yet any high-profile corporate departure is nuanced. To take Alexander at his word, the 20 years he has spent shuttling between Scotland and London will have been draining, all the more so if, according to sources, post- the departure of Feldman he was dealing with a more antagonistic board.

Moreover, unlike some past high-profile CEOs in the gaming space, Alexander firmly established a likely highly capable in-house successor in Segev, a move which will have made the decision on replacing him easier for the board.

But no matter how qualified, his successor has his work cut out for him.

As Alexander pinpointed in announcing the extra US investment the week before his departure was announced, the big bet for GVC isn’t necessarily one based on future M&A – though clearly don’t discount it - but is around making the US work.

Expectations at board level and among shareholders will demand that some of the gold dust that currently surrounds the US-listed sports betting and online gaming-related stocks transfers to UK-listed entities.

The same frisson will likely be apparent among the boards and shareholders of others in the European-listed space, particularly Flutter and William Hill. Similarly to Alexander, the early promise of the US online market has had transformative effect on the sector. It is one of the many small ironies of the world as it currently is that he should be among the victims of that change. The suspicion is that there are many such mini-earthquakes to come.

Scott Longley has been a journalist since the early 2000s, covering personal finance, sport and gambling. He has worked for a number of publications including Investment Week, Bloomberg Money, Football First, eGaming Review and Gambling Compliance. Scott now runs his own editorial consultancy, Clear Concise Media, and writes for a number of online and print titles.